Periodization is the process of changing one's work out over time so your body doesn't stop responding to the the usual workout stimulus. If you always do the same exercise routine, your body will eventually adapt and stop making gains. Without changing your workout, weight load, or intensity, it is easy to hit a plateau and stop seeing results.
When you make changes to your routine, it can shock the body into new progress. It is best to find a variety of exercises that can work the same muscle group you are trying to work. If all you ever do is the same exercise, you can get burnt out, over trained, and stop making progress.
Periodization also is the process of planning and cycling through different phases over the course of the year in order to get specific results or peak at a specific time. This involves dividing the year into different cycles. Long periods are referred to macrocycles. Cycles that last for several weeks or months are mesocycles. Daily periods are microcycles.
If an athlete tries to maintain peak performance year round then they are setting themselves up for over training, fatigue, and injury. Over the course of the year an athlete will go through different periodization phases. These may include cycles of emphasis on hypertrophy, strength, power, and then peaking at a certain time for their given event. Scheduling active rest and recovery is also an important part of periodization.